Gold Rises to Record $1,435.60 on Libya Unrest, Oil Rally

March 1 (Bloomberg) -- Gold rose to a record of $1,435.60
an ounce in New York as unrest in Libya spurred demand for the
metal as an investment haven.

Libya’s opposition gained support from the U.S. and
European nations as Muammar Qaddafi sent forces to regain lost
territory. Protests spread in the region, partly because food
prices have soared. Crude oil in New York topped $100 a barrel
today as Iranian protesters clashed with security forces in
Tehran. Gold rose for the 10th time in 11 sessions.

“The continued violence in the Middle East is bringing in
new buyers and spurring gold to new territory,” said Frank
McGhee, the head dealer at Integrated Brokerage Services LLC in
Chicago. “The rush to economic health is fading. Crude above
$100 is an energy tax that will force governments to put more
money into the system. Our old fear of stagflation returns.”

Gold futures for April delivery reached the all-time high
after the close of regular trading on the Comex in New York. The
metal had settled up $21.30, or 1.5 percent, at $1.431.20 at
1:49 p.m. The previous intraday record was $1,432.50 on Dec. 7.

Gold for immediately delivery rose as much as 1.7 percent
to a record of $1,434.93. The price climbed 1.6 percent to
$1,434.27 at 4:01 p.m. New York time.

In 2010, accelerating inflation and escalating sovereign
debt drove gold up 30 percent, the 10th straight annual gain.
Today, the Thomson Reuters/Jefferies CRB Index of 19 raw
materials also rose to the highest since September 2008.

Bernanke, Inflation

Federal Reserve Chairman Ben S. Bernanke said today the
surge in oil and other commodity prices probably won’t cause a
permanent increase in broader inflation. He repeated that U.S.
borrowing costs are likely to stay low.

Asian countries from China to Indonesia have raised
interest rates this year to curb inflation after governments
across the globe spent more than $2 trillion to jumpstart their
economies.

“We’ll see gold catch a bit of steam and cover new ground
to the upside very quickly,” said Matthew Zeman, a metal trader
at LaSalle Futures Group in Chicago. “This is about
geopolitical risk and the possibility of skyrocketing oil prices
wreaking havoc on a relatively fragile economy.”

A United Nations measure of global food prices rose to a
record in January. Costs have surged to “dangerous levels,”
pushing 44 million people into extreme poverty since June, the
World Bank said in February.

The European Union yesterday imposed an arms embargo and
other sanctions on Libya, while the U.S. said it has frozen $30
billion in the country’s assets. The UN estimates that more than
1,000 people have died in the uprising.

‘Fear’ Trade

“The continued instability overseas has brought the ‘fear’
trade back to gold,” said Adam Klopfenstein, a senior
strategist at Lind-Waldock in Chicago. “Gold and silver are the
big beneficiaries of the fear and uncertainty. Investors want to
buy first and ask questions later.”

In Africa and the Middle East, unrest that started in
Tunisia in January spread to Egypt, Bahrain, Iran and Yemen.
Libya has Africa’s largest oil reserves, and Iran is the second-biggest producer in the Organization of Petroleum Exporting
Countries behind Saudi Arabia.

“The current situation there is akin to a keg of
dynamite,” said Ong Yi Ling, a Singapore-based analyst at
Phillip Futures Pte Ltd. “As the political uncertainty prompts a
wave of risk aversion, gold is back in demand as a safe haven.”

Silver futures for May delivery gained 60.7 cents, or 1.8
percent, to close at $33.82 an ounce on the Comex. In electronic
trading after the settlement, the price reached $34.685, the
highest since March 1980. In that year, the metal climbed to a
record of $50.35.